Signaling, selection and transition: empirical evidence on stepping-stones and vicious cycles in temporary agency work

Despite the growing importance of temporary work agencies, the benefits they bring to
temporary agency employees (TAEs) are still disputed, and empirical findings are, by
and large, mixed. Using a unique dataset comprising almost 12,000 TAEs on their first
and second temporary work assignments, this work aims at disentangling the
consequences of temporary agency work on the level of the individual TAE in
Germany. We find that temporary agency work assignments act as learning devices for
employers about the underlying ability of TAEs. High ability employees can show their
qualities and fit with the organization with the time spent on temporary work
assignments, albeit at decreasing rates. In addition, we find that if a TAE is assigned to
a subsequent project after the first one, it is less likely that the employee transitions into
permanent employment. Hence, we conclude that a division exists among TAEs: where
the high ability employee may find it a stepping-stone to a desired permanent position,
and others get trapped in it and have a hard time transitioning into permanent
employment.